"What BigBasket has been missing is deep-pocketed investors till now, and if this deal goes through they will not have to worry about capital," said a venture capital investor tracking the space.Madhav Chanchani | ET Bureau | August 29, 2017, 08:21 IST

The initial 45-day exclusivity period was to end on August 25. Paytm Mall and Alibaba are seeking to invest about $200 million in BigBasket at a valuation to be decided after due diligence is completed, these people said.

India's largest online grocer is seeking a valuation of $1 billion - an estimate Amazon did not agree with during its now-dropped investment talks with BigBasket.

"What BigBasket has been missing is deep-pocketed investors till now, and if this deal goes through they will not have to worry about capital," said a venture capital investor tracking the space.

The valuation for the investment is expected to be decided after due diligence is completed. BigBasket is seeking a valuation of $1 billion, according to people familiar with the terms under discussion.

About $50 million of the overall $200 million investment by Paytm Mall and Alibaba could be used for buying out shares in BigBasket from existing investors.

"The deal is still not final," said one of the people mentioned above. A Paytm spokesperson declined to comment and BigBasket chief executive Hari Menon did not reply to emailed queries.

If the talks go through, a transaction with Alibaba and Paytm Mall could be finalised in the coming weeks, putting grocery at the centre of the battle for ecommerce market domination.

Amazon has started building its infrastructure for retailing fresh produce in the country after recently securing government approval for investing in the sector through its new entity Amazon Retail.

Amazon India has already built a significant presence in the segment through products like Pantry and Amazon Now. Rival marketplace Flipkart, which has got backing from SoftBank and Tencent this year, also plans to enter the online consumer goods and grocery sector this year, though it is likely to stay away from selling fresh produce to begin with.

The entry of highly capitalised entities in the space comes as grocery, which accounts for about half of the overall retail market, has emerged one of the fastest-growing categories. As for online retail, grocery accounts for a mere 4% share, show data from consulting firm Praxis Global Alliance.

BigBasket's gross merchandise value, or gross sales, was the fastest growing among major online retail companies, and the company registered a compound annual growth rate of about 209% between 2013-14 and fiscal 2014-15, according to Praxis.

The company's in-house brands, including Fresho for fruits and vegetables and Happy Chef for gourmet foods, accounted for more than one-third of its sales.

BigBasket also started express delivery in 60 minutes last year to take on Grofers. The company registered about Rs 1,400 crore in revenue in fiscal year 2017.

Paytm and Alibaba's investment in BigBasket will give it enough ammunition to defend its turf, while the combine will gain an entry into the fastest-growing online retail segment.